With the conclusion of 2025 approaching, the well-known S&P 500 index stands on a 17% increase this year, which notably surpasses its historical average annual growth rate of 10.5% since 1957. Yet, investors who allocated capital to the Vanguard Information Technology ETF (ticker: VGT) at the beginning of this year have enjoyed an even greater return, around 23%, showcasing the ETF's ability to outperform the broader market.
The Vanguard Information Technology ETF is designed to provide comprehensive exposure solely to the information technology sector. It encompasses a diverse portfolio of 322 individual stocks drawn from both inside and outside of the S&P 500. This breadth allows investors to participate extensively in prevailing high-growth technological trends, including the rapidly developing field of artificial intelligence (AI).
The ETF's exceptional performance throughout 2025 is not a one-time occurrence. Since its inception in 2004, it has consistently beaten the S&P 500 every year, emphasizing its strong track record for delivering superior returns. This historical success and current positioning lead to the expectation that the ETF will continue to surpass the S&P 500 in 2026.
Concentration in Leading AI and Semiconductor Stocks
A key factor behind Vanguard’s ETF success lies in its investment across the information technology sector's twelve sub-industries. The largest allocation, comprising 32.1% of the portfolio, is in the semiconductor segment. This is unsurprising given that several of the ETF’s largest holdings are monumental semiconductor companies with massive market capitalizations; Nvidia leads with a valuation of approximately $4.4 trillion and Broadcom follows with about $1.6 trillion.
The ETF’s prominence in hardware suppliers, including companies producing data center chips and networking equipment, aligns closely with the ongoing AI revolution. These components serve as integral building blocks for AI infrastructure and have been a central driver of demand among the ETF’s top holdings.
Additionally, the portfolio includes notable AI software and platform providers. The top 10 holdings and their percentage weightings as of November 30, 2025, illustrate this concentration:
| Stock | Portfolio Weighting |
|---|---|
| Nvidia | 16.61% |
| Apple | 15.31% |
| Microsoft | 12.43% |
| Broadcom | 5.23% |
| Palantir Technologies | 1.85% |
| Advanced Micro Devices | 1.73% |
| Oracle | 1.67% |
| Cisco Systems | 1.52% |
| International Business Machines | 1.44% |
| Micron Technology | 1.33% |
Though the ETF invests in over 300 stocks, the performance is heavily skewed towards these ten companies, which collectively account for 59.1% of the fund's market value. Many of these key holdings demonstrate robust business fundamentals, suggesting potential for sustained growth beyond 2025.
Drivers Supporting Future Growth
Several of the leading semiconductor firms within the ETF—Nvidia, Broadcom, AMD, and Micron Technology—are at the forefront of supplying critical components for data centers and AI model development. These companies face demand that exceeds current supply capabilities, and their data center divisions are experiencing rapid revenue growth, which could translate into continued strong stock performance.
On the software and services side, Microsoft and Oracle, also among the top holdings, play pivotal roles as massive consumers of AI chips and data center equipment. Their cloud platforms provide essential computing capacity that clients lease to develop and deploy AI applications. The business models of these cloud giants are highly profitable, supported by substantial backlogs of customer orders awaiting the availability of additional infrastructure capacity.
Outside the top 10 holdings but still part of the ETF, there are other notable AI-focused companies, such as Salesforce (customer relationship management software), cybersecurity firms CrowdStrike and Palo Alto Networks, and cloud data platform provider Snowflake. These stocks highlight the ETF’s comprehensive capture of the AI ecosystem, spanning hardware, software, and services.
Long-Term Track Record Demonstrates Versatility
Since launching in 2004, the Vanguard Information Technology ETF has delivered a compound annual growth rate of approximately 14.1%, outpacing the S&P 500’s 10.4% average growth over the same timeframe. While AI currently drives much of the ETF's momentum, its historical returns were also supported by prior transformational technologies such as smartphones, enterprise software, and cloud computing.
Looking beyond AI, the technology sector's adaptability suggests that emerging innovations including quantum computing, robotics, and autonomous vehicles could become new engines of growth when the current AI expansion reaches maturity. This technological dynamism reinforces the sector’s appeal and the ETF’s ability to capture evolving growth themes.
Prospects for Continued Outperformance in 2026
Major indicators for 2026 point toward increased expenditure on AI-specific data center infrastructure, which is expected to benefit key ETF holdings heavily weighted in chipmakers and hardware suppliers. Moreover, increasing capacity at Microsoft and Oracle’s cloud divisions is poised to accelerate revenue growth as they work through their order backlogs.
This combination of strong demand for AI infrastructure and expanding cloud services capacity underpins the anticipation that the Vanguard Information Technology ETF will once again outperform the S&P 500 in 2026. For investors seeking diversified exposure to the AI revolution and broader technological advances, this ETF presents a compelling portfolio addition.